Credit and Finance
Do you know who your customers and suppliers are overseas?
Posted on by Cindy Yip
Estimated read time: 4 mins
Many businesses are reluctant to trade overseas due to the uncertainty they feel about it. There are many challenges to trading overseas and sometimes despite how much your business is ready to take this step, you personally may not be ready to expose your business to such risks yet. As you’ll be working with businesses that aren’t easily accessible geographically, everything may seem a little bit out of touch and it could concern you as to how you’ll manage everything remotely. But before you even get to this stage, how do you find the right customers and suppliers for your business? There could be many different factors you base this decision on, price, reputation, credibility, quality, logistical but what about financial stability? Thinking about whether they are in business for the long run, the health of their current and past financial books and what this indicates about their business.
Financial stability could be a factor that businesses overlook; many businesses may not consider that just because a company is trading now, this may not mean they’ll still be doing so six or 12 months down the line. Even customers that may have seemed reliable in the past, there’s still the possibility they could be facing financial problems that you don’t know about and may be unable to pay you later on. And since cash is the lifeline of any business, financial stability should be one of the primary factors in how you choose who to work with.
Many businesses know to credit check their customers and suppliers who are in the UK but seem to overlook this when trading overseas. It’s equally as important to know who you’re working with abroad or it can be argued that it’s even more important. More than likely not, more investment, time and effort would’ve been put into taking your business overseas and it wouldn’t be worth it failing just because some quick due diligence was missed out.
A credit score can tell you a lot about a business’ current and past financial status revealing information that you may not have known about them. A credit score takes into account many different factors such as the industry and age of the business, its ability to pay promptly in the past, who is associated with it (directors) and the filing of their accounts. It can essentially tell you how financially reliable that business has been and is currently.
You may choose not to trade with someone who has a lower credit score, potentially indicating that they haven’t been meeting their own payment terms or that their country is currently experiencing an economic downturn. You’d want to trade with someone whose credit score shows a green light indicating they’ve paid their suppliers on time, their accounts are filed correctly and their business is growing year on year, with directors who’ve had positive companies associated with them.
Knowing this information can help you to make the right business decisions and the confidence to carry on full speed with your plans to trade overseas, and not worry about whether any of the businesses you’re working with could cause trouble for you at any time. Accurately assess the risk of dealing with international businesses with Experian’s International Credit Reports available in 238 countries. Take advantage of the right opportunities to help your business grow and make insightful choices.